Energy-efficient building has become a megatrend
\nASX stock EP&T is vying for market share in this rapidly growing space
\nStockhead reached out to EP&T\u2019s CEO, John Balassis<\/p>\n
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Green technology has emerged as a megatrend that\u2019s gaining momentum across the globe.<\/p>\n
The term itself is broad and encompasses a wide range of innovations across various sectors \u2013 including renewable energy, transportation, agriculture, and waste management.<\/p>\n
But one area of adoption that\u2019s quickly gaining traction is the energy-efficient building space<\/strong>, where green technology has emerged as a permanent feature in many newly constructed structures to reduce energy usage.<\/p>\n As far as value propositions go, they can\u2019t get more compelling: energy usage in buildings accounts for approximately a third of all greenhouse gas emissions annually.<\/p>\n One Australian company that\u2019s vying for a slice of this potentially big global market is ASX-listed, EP&T (ASX:EPX)<\/a><\/strong>.<\/p>\n Listed in 2021 with a current market cap of around $10m, the company\u2019s flagship product is EDGE<\/strong> \u2013 a platform that detects real-time energy inefficiencies in buildings.<\/p>\n EDGE has been installed in over 550 buildings across Australia, UK, US, and the Middle East.<\/p>\n EP&T\u2019s CEO, John Balassis,<\/strong> explained to Stockhead<\/em> that when the company\u2019s founder set this business up many years ago, he had a single focus in mind.<\/p>\n \u201cAnd that was to help property owners reduce energy consumption. So the DNA of the company hasn\u2019t really changed a lot.\u201d<\/p>\n \u00a0<\/p>\n Balassis explained that the company (which is short for Environment, Property & Technology) has progressed rapidly since, and is now near an inflection point.<\/p>\n He points to three thematics that could drive the business to new heights.<\/p>\n The first is the ongoing energy crisis<\/strong> triggered by recent geopolitical tensions.<\/p>\n \u201cIn the UK and in Europe for example, we\u2019ve seen an increase in energy prices by 200% to 300%,\u201d Balassis said.<\/p>\n The second tailwind, says Balassis, is the need for building owners to switch their energy usage quickly as hybrid working<\/strong> becomes more commonplace.<\/p>\n \u201cWhether it\u2019s retail, commercial or industrial property, tenants and landlords want to be able to quickly downsize and upsize property based on the need.\u201d<\/p>\n And the third element that has become more prevalent is legislative changes<\/strong>, which are driving a lot of the net zero programs.<\/p>\n \u201cBut the common thematic in all of these three is accurate and consistent data,\u201d Balassis said.<\/p>\n \u201cEDGE\u2019s fundamental value proposition is that it constantly gives our customers accurate and consistent data.\u201d<\/p>\n \u00a0<\/p>\n EP&T collaborates with building managers to improve and optimise building plant operating systems, and deliver significant energy savings.<\/p>\n The EDGE platform<\/a> monitors and collects BMS (building management system)<\/strong> information 24\/7 \u2013 including electricity, gas, thermal and water usage data, to identify inefficiencies and provide auditable data to rectify faults and optimise building operations.<\/p>\n E&P estimates that across its client portfolio, the average reduction in energy consumption from using EDGE is 21%.<\/strong><\/p>\n Around 85% of its clients achieve 10% or more savings, 38% of sites achieve 20%, while 18% of sites achieve 30% or more savings.<\/p>\n Meanwhile, almost half of the installations are in commercial real estate, which are basically office buildings.<\/p>\n \u201cThen about 30% are in hotels, and the remaining is shared between retail, industrial, and some very small high rise residential,\u201d said Balassis.<\/p>\n In Europe and the UK, where around half of EP&T\u2019s clients are based, the pace at which legislative changes is taking place is very encouraging for the business.<\/p>\n \u201cTo be frank, the driver of our business in the UK and Europe has been legislative change, and how quickly the European Union and the UK Parliament have adopted environmental net zero legislation into mainstream commercial real estate.<\/p>\n \u201cSo that\u2019s prompted quite a lot of property owners there to move quick into capturing the E bit of the ESG data reporting requirement.<\/p>\n \u201cAnd what you\u2019re seeing in Europe, and fingers crossed in in Australia, is legislative changes which in effect will move ESG reporting to be mandatory reporting.<\/p>\n \u201cThat will be a big tailwind for us, at the same time when energy prices are being where they are right now,\u201d said Balassis.<\/p>\n \u00a0<\/p>\n Revenue in FY23 was $10.6m, an increase of 50% from FY22.<\/p>\n Around 89% of that revenue is recurring, and on average, a paying client stays around for 4.1 years.<\/p>\n \u201cThey\u2019re relatively sticky in the way that they engage with our business, and from our perspective, our technology continues to be able to deliver for them \u2013 be it in energy savings, or to win awards,\u201d Balassis said.<\/p>\n Over the last 10 years, multiple EP&T clients have won the world\u2019s most prestigious energy efficiency and sustainability awards, including the renowned NABERS<\/em> and GRESB<\/em> awards.<\/p>\n Meanwhile, EP&T has provided the market with a ACV (annual contract value) guidance of between $16million \u2013 $17 million for the full year of FY24.<\/p>\n While the company is yet to be profitable, the needle is moving in the right direction: Underlying EBITDA has improved from a loss of $6.5m in FY22, to $4.9m loss in FY23.<\/p>\n \u201cWe right sized the cost base in the company, by flattening the structure of the business which has improved our operating efficiency metrics.<\/p>\n \u201cAs a result, we\u2019ve also been able to stabilise the business, and have now reached two quarters of cash flow breakeven.<\/p>\n \u201cSo one could take the view that as we improve our cash flow, that\u2019s a metric for how we\u2019re likely to improve our profitability moving forward,\u201d said Balassis.<\/p>\n The company has also just successfully completed a $2.1 million placement and institutional entitlement offer<\/strong> at $0.02 per new shares \u2013 with funds to be used mainly toward revenue growth.<\/p>\n \u201cChanges to the business over the last 12 months has positioned the business to focus on growth, as it is now at operating cash flow break-even.<\/p>\n \u201cOur technology continues to be useful, and we continue to sell the technology in a global landscape \u2013 and that\u2019s no small feat for a small little Australian business founded in Sydney.<\/p>\n \u201cAnd we\u2019ve done a lot of work in the business to transition away from loss making, to being positioned to become profitable,\u201d said Balassis.<\/p>\n \u00a0<\/p>\n ClearVue Technologies (ASX:CPV)\u00a0<\/a><\/strong><\/p>\n ClearVue\u2019s flagship product is the\u00a0integrated glazing unit or IGU, a novel technology that enables windows on buildings to not only generate, but also conserve electricity at the same time.<\/p>\n How it works is that the\u00a0IGU technology is first inserted between two panes of glass\u00a0in a building window.<\/p>\n Nanoparticles are then inserted in the glass that deflect the energy of the sun, the solar radiation, and disperse it to the edges of the glass where we embed solar cells that pick up the energy, and turn it into electricity.<\/p>\n This means that buildings equipped with Clearvue\u2019s technology have reduced cooling load.<\/p>\n Read more: ClearVue\u2019s solar window technology gains rapid traction, share price up 3x in 12 months<\/a><\/strong><\/em><\/p>\n \u00a0<\/p>\n X2M Connect (ASX:X2M)<\/a><\/strong><\/p>\n X2M is an Australian company working with the South Korean government to alleviate the problem of water management.<\/p>\n X2M owns a patented technology that can be connected with water and gas meters, enabling utilities to obtain live data from the one platform.<\/p>\n The company is retrofitting water meters in South Korean cities to make them \u201csmart\u201d and communicate with X2M\u2019s IoT platform.<\/p>\n For the household, the technology can provides accurate real time data on usage, increasing the accuracy of billing.<\/p>\n For the local government, X2M\u2019s technology can detect leaks and inform social welfare services when there are cases of non-usage.<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n\n \ufeff<\/span><\/span>\u00a0<\/p>\n The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead.<\/em><\/p>\n Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.<\/em><\/p>\n <\/span><\/p>\n The post Catching a megatrend: Why ASX-listed EPX could be one to watch in rapidly growing green tech space<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"3 thematics to drive business growth<\/h2>\n
How does EDGE work?<\/h2>\n
On track to profitability<\/h2>\n
Other ASX stocks in a similar space<\/h2>\n
Share prices today:<\/h2>\n